European stocks fall on fears of Middle East escalation; central banks in focus

Investing.com - European stocks fell Thursday, with speculation of U.S. intervention in the Middle East keeping investors cautious ahead of a series of central bank meetings.

At 03:15 ET (07:15 GMT), the DAX index in Germany dropped 0.7%, the CAC 40 in France slipped 0.7% and the FTSE 100 in the U.K. fell 0.4%. 

U.S. to join Israel-Iran conflict?

Israel and Iran have continued to trade air attacks Thursday, but it’s renewed speculation that the United States would join Israel’s bombardment of Iranian nuclear and missile facilities that has rattled investors, threatening to broaden the regional conflict.

U.S. President Donald Trump added to the conjecture on Wednesday, saying "I may do it. I may not do it. I mean, nobody knows what I’m going to do,” when asked if he had made any decision on whether to join Israel’s air campaign. 

“I can tell you this, that Iran’s got a lot of trouble, and they want to negotiate,” he added.

Bloomberg reported on Thursday that senior U.S. officials are preparing for the possibility of a strike against Iran by as soon as this weekend, although the situation still remains unclear. 

Iranian Supreme Leader Ayatollah Ali Khamenei on Wednesday dismissed Trump’s earlier call for Iran to surrender, in his first appearance since Friday.

"Any U.S. military intervention will undoubtedly be accompanied by irreparable damage," he said in a recorded speech played on television. "The Iranian nation will not surrender."

Iran denies it is seeking nuclear weapons and says its program is for peaceful purposes only. The International Atomic Energy Agency said last week Tehran was in breach of its non-proliferation obligations for the first time in 20 years.

Fed stands pat; more central banks in focus

The Federal Reserve left its benchmark short-term rate unchanged at 4.25% to 4.5% on Wednesday, as widely expected, and Chair Jerome Powell largely reiterated the central bank’s cautious stance on future rate cuts, citing expectations of increased inflation from Trump’s trade tariffs. 

He maintained the Fed’s projections of two more rate cuts in 2025, but trimmed the outlook for rate cuts in 2026. 

U.S. markets are closed for the Juneteenth holiday on Thursday, and attention switches to central banks in Europe, with monetary policy decisions coming from Norway, Switzerland and the United Kingdom (TADAWUL:4280).

The Bank of England is widely expected to hold interest rates unchanged, and investors will be waiting to see how policymakers voted and for any guidance on the rate cut trajectory, with most analysts expecting a cut in August.

The Swiss National Bank is likely to lower its interest rates, potentially into negative territory once more, while the Norges Bank is seen standing pat.

Vodafone (LON:VOD) appoints new CFO

There is little in the way of economic data due in Europe, and major corporate earnings are also thin on the ground.

Vodafone (NASDAQ:VOD) said that Microsoft’s Pilar López has been appointed Chief Financial Officer effective October 1, succeeding Luka Mucic, who is leaving the company.

Frasers Group (LON:FRAS) said it will not make an offer for a U.K.-based cosmetics and skincare retailer Revolution Beauty (LON:REVB).

Crude gains on Middle East conflict

Oil prices rose Thursday as traders weighed the possibility of U.S. invention in the Iran-Israel conflict.

At 03:15 ET, Brent futures climbed 1% to $77.47 a barrel and U.S. West Texas Intermediate crude futures rose 1.1% to $74.31 a barrel.

Direct U.S. involvement would widen the conflict, putting energy infrastructure in the region at higher risk of attack.

Goldman Sachs on Wednesday said a geopolitical risk premium of about $10 a barrel is justified given lower Iranian supply and risk of wider disruption that could push Brent crude above $90 a barrel.